Kenyan blue chips lift Uganda stock market valuation

Tuesday January 1 2013

A section of the EABL plant. East African Breweries Limited is among top Kenyan companies cross-listed on the Ugandan stock market that were the main movers of that bourse last year. Photo/FILE

A section of the EABL plant. East African Breweries Limited is among top Kenyan companies cross-listed on the Ugandan stock market that were the main movers of that bourse last year. Photo/FILE Nation Media Group

By John Gachiri Business Daily

Kenyan firms cross-listed on the Ugandan stock market were the main movers of the neighbouring country’s bourse in 2012, trading data up to the end of the year has showed.

The high capital gains of Kenyan firms listed on the Uganda Securities Exchange helped to lift the bourse’s valuation, according to a summary report done by the country’s Capital Markets Authority (CMA).

About seven Kenyan firms are cross-listed on the Ugandan exchange out of a total of 15 companies that are traded on the bourse.

“The rise in market capitalisation was driven by an increase in the market capitalisation of five cross-listed counters (Nation Media Group, Kenya Airways, Jubilee Holdings, East African Breweries Limited and Equity Bank Limited), Bank of Baroda Uganda as well as the listing of Umeme shares,” says the latest CMA (Uganda) Monthly report.

Between January and December 2012 the USE’s market capitalisation increased by 36 per cent to $5.81 billion from $4.26 billion, driven mainly by the strong performance of Kenyan stocks.

KCB’s share, which is also cross-listed on the USE, was not included in CMA Uganda’s report but its stock was the highest performer of all cross-listed shares in 2012, appreciating by 80 per cent in 2012.

KCB’s share price closed 2012 at Sh29.75, an 80 per cent increase from the Sh16.80 opening level for 2012.

Nation Media Group’s share price rose by 57 per cent to Sh222 from Sh140, EABL rose by 54 per cent (Sh264 from Sh175), Equity Bank 44 per cent (Sh24 from Sh16.75), Jubilee Insurance by 11.61 per cent (Sh173 from sh155).

The other Kenyan firms cross-listed on the Ugandan bourse are Centum and Kenya Airways, which saw their share prices drop over the year.
Centum’s share price went down marginally to Sh12.40 from Sh13.50, a 5.34 per cent drop.

Kenya Airways saw its share price slump in 2012 to Sh11.25 from Sh20.50, a 45 per cent drop, but its total market capitalisation has risen due to the addition of one billion shares from the rights issue.

At the beginning of 2012 and before the rights issue Kenya Airways had a Sh9.4 billion market capitalisation, but after the rights issue this rose to Sh16.69 billion despite the price drop.

Ugandan utility provider, Umeme, is cross-listed on the Nairobi Securities Exchange (NSE).

Overall Kenyan firms account for around 85 per cent of the USE’s market valuation, which makes the capitalisation of the two exchanges move in unison.

Ugandan stockbrokers and investment banks said the lack of seamless trading between Ugandan and Kenyan investors had created inefficiencies between the two bourses.

African Alliance Investment Bank (Uganda) chief executive Ken Kitariko said the lack of a seamless trading platform between the USE and the NSE has limited fund managers and retail investors from active trading in cross-listed stocks.

“Most cross-listings were made on a public relations basis. Quite a number of (Ugandan) firms did not participate in the initial public offers,” said Mr Kitariko.

The requirement that a local stockbroker must have a counterpart on the other side to buy and sell on their behalf makes it difficult to trade in a short time.

“Cross-listed stocks still face a challenge in being tradable,” said Robert Baldwin, the chief executive of Crested Stocks and Securities, a Ugandan brokerage house.

The NSE and the USE have said that they are working on changes to make trading of cross-listed shares the same as any others.

“A proposal for an inter-depository transfer process awaits approval by our regulators. I wish to assure the shareholders of Umeme Holdings that once the process is approved, investors will trade their Umeme Holdings shares on the NSE, as easily as they are traded at the USE,” said NSE chief executive Peter Mwangi at the Umeme cross-listing ceremony early last month.